The Condo Act has been undergoing some changes, starting early December 2015 when Bill 106 received Royal Assent, and was officially called the Protecting Condominium Owners Act, 2015 (“PCOA”). The three main areas it covers are: (a) major reform to our current condo legislation – the Condominium Act, 1998 (the “Act”); (b) legislation for licensing of managers – the Condominium Management Services Act, 2015 (“CMSA”); and (c) reforms to Tarion warranty coverage to cover conversions. The government has also recently announced a whole-scale re-structuring of Tarion itself.
So we are entering a brave new world, with great hope that this will significantly improve our condominium community, enhance consumer protection, yet not stifle development.
PCOA does not become law until the regulations have been passed. The task has turned out to be much more complicated than originally expected as they will be significantly lengthier than our present regulations. It has been a great pleasure to have participated, along with many other professionals, in consultations with the Ministry about the regulations.
This article will briefly discuss Phase I of the draft regulations for the reforms to the Act, because they will impact directors, owners and your corporations more immediately. The newly created, but not yet open, organization for our industry (that will become an Administrative Authority), called the “Condominium Authority of Ontario” (“CAO”) will also be discussed. Stay tuned for a future article on the licensing of condo managers and their own Administrative Authority called the Condominium Managers Regulatory Authority of Ontario (“CMRAO”).
A. Regulations for the Reforms to the Act (Phase I)
Since the regulations have become quite complicated, the government decided that rather than wait until they are all completed, it will phase them in so that portions of the amendments to the Act can be proclaimed and become law. Then the balance of PCOA can be phased in as the regulations are passed (hoped to be completed by early 2018).
The first phase of draft regulations for the condo reforms were published in mid February for public input and comments, which has now been completed. These draft regulations focus only on governance issues (how to run your corporation). Please note that that these draft regulations may change after the government has considered the public’s and stakeholders’ input.
CCI’s Legislative Committee (on which this writer has the privilege of being the Chair) met in March and produced a Brief of comments that it sent to the government. This Committee is made up of 10 industry professionals and represents the views of all 7 Ontario Chapters of CCI.
The draft regulations deal with 4 key areas:
1. Communications from Corporations to Owners
(a) Information certificates
There will be three different types of prescribed certificates/forms that will have to be sent out to owners (with an exemption for small corporations if stipulated requirements are met):
(i) Periodic Information Certificate (“PIC”) – To be sent to owners twice during the fiscal year and will contain updated information, for example, names of directors and officers, address for service of the corporation, copy of the budget, a copy of any disclosures made by directors under the new disclosure requirements.
(ii) Information Certificate Update (“ICU”) – To be sent to owners within 15 days of certain events occurring during the year, such as a change in directors or officers; and
(iii) New Owner Information Certificate (“NOIC”) – To be sent to all new owners and will contain information from the most recent PIC and ICU.
(b) Record of Owners and Notice to Owners
Owners will have to give notice in writing setting out their name and identifying the unit, within 30 days after becoming an owner. If the owner agrees, then the corporation can communicate electronically with them (communications, notices of meetings, etc.). Also, documents will, in certain circumstances, be allowed to be “delivered” to the unit or its mailbox.
2. Directors Mandatory Disclosures and Training (Education)
PCOA amends the act with respect to qualifications and disqualifications of directors. There are new requirements, for example: (a) mandatory disclosure of certain information by directors and also candidates running for the board; and (b) mandatory education/training of all directors after they are elected.
(a) Disclosure by Directors and Candidates
All candidates will have to submit a statement (probably a prescribed form) either when they submit their candidacy or at the meeting (if nominated from the floor), containing required disclosure information (if any applies), such as whether they (or their spouse, child or parent) are a party to any legal proceedings; have they been convicted of an offence under the Act; any conflict of interest as defined by the Act, and more. Sitting directors will also have increased disclosure requirements similar to that for candidates.
(b) Mandatory Education of Directors
After the legislation becomes law, then within 6 months of being elected or appointed, a director will have to complete the required training. The content and delivery of the education material is currently being prepared, but the idea is (but not yet decided) that it be free, no more than 3 hours, available online and in short modules, with no exam or test.
3. Meetings and Voting
There will be new requirements for preliminary notices and notices of owners meeting. These hopefully will be in prescribed forms and are designed to give candidates and owners more information and advanced notice of meetings, and include the information certificates and any director’s disclosure statements.
The quorum threshold for certain meetings will be lowered. For example, on the 3rd attempt for an AGM, the quorum will drop from 25% to 15%. The regulations will be able to set different voting thresholds for by-law approvals (with certain limitations). There is greater clarity about voting, a mandatory prescribed form of proxies and mechanisms to reduce abuse.
4. Corporation’s Records – Retention and Access (Sec. 55 of the Act)
This is an important issue because the largest number of disputes arise from corporation’s records and access to them. It is also important because it is contemplated that this will be the first issue that the CAO’s dispute resolution mechanism and the Tribunal will deal with.
The regulations will better define what are corporate records and stipulate minimum retention periods – from unlimited (for fundamental records), to the time when ballots and proxies can be destroyed. The industry is also being strongly encouraged to move from paper records to electronic, including electronic proxies.
For access to records – good owners versus a bad board; and a bad owner against a good board -the regulations set out a new procedure and prescribed forms, to deal with document requests, charging a fee, reply by the board and dispute resolutions mechanisms. These reforms are designed to reduce disputes, and if they cannot be resolved then to have them dealt with in a more expeditious and cost effective manner through the CAO.
B. The Condominium Authority of Ontario (CAO)
The CAO was incorporated as a not-for-profit corporation in 2016. It is a non-government body that is self financed and self run. No funds it collects go to the government. Later this year it is hoped be certified as an “Administrative Authority” and open its doors on a limited basis. Examples of Administrative Authorities are Tarion and the VQA (for classification of Niagara region wines).
The CAO will have 3 main functions: 1) public education and information about condos; 2) dispute resolution, which will be its biggest function; and 3) a database of information about every condominium corporation in Ontario.
A large part of the CAO will deal with dispute resolution including a tribunal (called the CAT). It is anticipated to include a very robust online dispute resolution tool (guided pathway to assist in education, facilitation and early resolution of the dispute), and if not resolved, then adjudication. At the outset, it is planned that the CAT will deal with only Sec. 55 (records) disputes. This will allow the CAO to fine tune the CAT to make it as user centric as possible.
The CAO will be funded primarily by a fee to be paid by owners. It is extensively studying what the fee amount should be, but as previously mentioned in the media over the last couple of years, it is hoped that it will be in the range of $1.00 per unit per month. The CAO will invoice the corporation who will add it to their operating budget as a common expense. I strongly encourage all corporations to start budgeting for it now.
A tremendous amount has occurred since September 2015, with much more to be done. However, we are on the cusp of that brave new world. Stay tuned!